Iran says a host of European giants are bidding for the development of its South Azadegan oil field – which was once considered as the world’s biggest oil find after it was discovered over 15 years ago.

Nouroddin Shahnazizadeh, the managing director of the Petroleum Development and Engineering Company of Iran, told the domestic media that the leading European bidders for the project include Total (France), Shell (UK/Hollande), Eni (Italy), Wintershall (Germany), Rosneft (Russia), OMV (Austria) and Maersk (Denmark).

Shahnazizadeh added that several Asian companies including CNPC and Sinopec (China), ONGC (India), Pertamina (Indonesia), Petronas (Malaysia) and PTTP (Thailand) would also participate in a tender over South Azadegan.

The official said officials from the bidding companies had visited Iran for three days to become fully aware about the conditions of the project. Almost a dozen of them, he added, had been even taken to visit the project site.

Nevertheless, Shahnazizadeh did not indicate when the tender over South Azadegan would be held.

Iran has repeatedly postponed the tender over the giant field which it jointly shares with Iraq.

Reuters quoted an unnamed Iranian official as saying in June that the bidding over the project had been delayed by another few months.

This, the unnamed official told Reuters, was meant to allow energy companies more time to study the field.

Iran discovered Azadegan oil field in 1999 in what was the country’s biggest oil find in decades. The country accordingly teamed up with Inpex to push the project toward development. However, the Japanese company later quit the project in what appeared to be the result of US sanctions against Iran.

The NIOC later divided the project into South Azadegan and North Azadegan and both were awarded to China’s CNPC when Iran’s former president Mahmoud Ahmadinejad (2005-2013) was in office.

The media reported in 2014 that Iran’s Oil Minister Bijan Zangeneh had sidelined CNPC from South Azadegan due to its protracted delays in developing the field.

South Azadegan is believed to hold an in-place oil reserve of about 33.2 billion barrels and its recoverable resources estimated at about 5.2 billion barrels.

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An oil official said once production volume at South Azadegan reaches 160 thousand barrels per day (bpd), West Karun joint fields will bring a revenue of 2.5 million dollars.

Majid Najarian, deputy project director for development of South Azadegan oilfield, said 565 million dollars were invested over three years to increase output of North Azadegan to 35 thousand barrels per day while, for the South Azadegan case, crude production soared to 40 thousand bpd in less than five months and by spending one fifth of the designated budget.

Azadegan oil field in south west of Iran is located about 80 Km. west of Ahwaz
and straddles the Iran-Iraq border.

Over the past months, about 19 new wells have been drilled in the joint field, said the official, nearly a quarter of the yielded oil is directed to the northern cluster while the remaining thirty thousand barrels are transferred to refineries through a 32-inche pipeline.

Najarian said all measures, including pipeline installation, well drilling and establishment of wellhead equipment, are successfully accomplished adding “presently, a three-hour shut down of the factory is required its new control program to come on stream.”

He emphasized that output of South Azadegan will climb to 160 thousand barrels by the end of the current Iranian calendar year (began March 21) asserting “a total of 12 more wells are scheduled to be drilled in the coming two or three months in a bid to lift production level by 25 thousand barrels.”

“Also in the southern part of the field, 13 wells will come on stream yielding 28 thousand barrels per day,” he continued.

The official said a skid mount project will also add 50 thousand barrels to South Azadegan’s daily crude production.

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Drilling operations on 40 oil wells in South Azadegan oilfield have shown 91 percent progress, said director of the South Azadegan oilfield drilling project in National Iranian Drilling Company (NIDC).

Azadegan oil field in south west of Iran is located about 80 Km. west of Ahwaz
and straddles the Iran-Iraq border.

Manouchehr Assadi said his company had drilled more than 140,000 meters as part of the operations to drill 40 wells, Fars News Agency reported.

Eight heavy onshore drilling rigs of the NIDC were used for drilling the wells, said the official.

With the expulsion of the Chinese company from South Azadegan field in the year to March 2015, the drilling operation of 40 wells was ceded to the NIDC by the Petroleum Development and Engineering Company (PDEC).

The official said out of 43 wells, 30 are completed, finalized and put at the disposal of the employer.

The NIDC is now drilling in South Yaran and Azar fields, Phase 14 of South Pars as well as the onshore part of Kish gas field.

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Iran has exported about 8 million barrels of crude oil from North Azadegan oilfield since the beginning of current Iranian calendar year (March 20), Shana quoted Keramat Behbahani, the operator of project for developing the oilfield, as saying on Tuesday.

North Azadegan is one of the five oilfields, dubbed the West Karoun oilfields, Iran shares with Iraq at the western part of Iran’s southwestern region of Karoun.

The project of developing North Azadegan oilfield is divided into two phases, each aimed at producing 75,000 barrels per day (bpd) of oil and 39 million cubic feet per day of gas.

According to Behbahani, since the first phase is almost completed, the payments to the Chinese contractor of this phase are being arranged.

Based on the initial agreement, China National Petroleum Corporation International (CNPCI) should present its proposal for the second phase, and in case of being approved by National Iranian Oil Company (NIOC), the second phase of the development project will be executed.

“For the second phase, producing 25,000 barrels per day is on the agenda,” Behbahani said adding that the preliminary studies of the second phase carried out by Petroleum Engineering and Development Company (PEDC) show that the oil in place amount of the field will be about 6.3 billion barrels in the second phase.

Elsewhere in his remarks, the official noted that in the project of developing North Azadegan oilfield, 67 percent of the contracts are allocated to domestic companies especially National Iranian Drilling Company.

Earlier in July Behbahani told the Tehran Times that foreign investment in development of North Azadegan oilfield is conditioned on preserving the national interests of Iran.

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Iranian Minister of Petroleum Bijan Zangeneh says Iran will need 200 billion dollars for financing oil and gas projects under the 6th development plan of the country.

Speaking after a ceremony to sign a deal between National Iranian Oil Company (NIOC) and an consortium comprising Total, China’s CNPC International and Petropars in Tehran on Monday, Mr. Zangeneh said $130 billion dollars will be invested in upstream projects and the rest will be allotted to developing downstream projects in the industry.
He said over 70% of the amount can be supplied by tapping foreign resources, adding, “We need foreign investments in order to reach the envisaged 6 million barrels per day of crude oil and condensate output under the 6th development plan of the country.”
The official also said that arrangements for holding a tender for developing Azadegan Oilfield.

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By Karen Gilchrist: Iran signed a $5-billion deal with a consortium led by French oil company Total on Monday to develop the giant South Pars Gas Field — the world’s largest natural gas field.

The deal is the Islamic Republic’s first with a European oil company in more than a decade, marking a major milestone for a country whose standing as an international trade partner has hung in the balance ever since it was slapped with sanctions in 2006 amid concerns that it was developing nuclear weapons.

Total has taken a 50.1 percent interest in the South Pars project, and alongside state-owned China National Petroleum Corporation, which holds 30 percent, and Iran’s Petropars (19.9 percent), will begin producing gas for the Iranian market from 2021.

Though the deal has been a slow burn, coming some 18 months after EU sanctions against the Middle Eastern nation were lifted, Iran will be hoping that it marks a new era of investor confidence and a particular boon for its dwindling oil production.

“Total’s decision to sign the South Pars 11 contract is a cautiously positive sign for foreign investment in Iran’s upstream,” Richard Mallinson, geopolitical analyst at Energy Aspects, told CNBC via email on Monday.

Who else is ready to invest in Iran?

Already, India, one of Iran’s most steadfast trading partners, on Monday announced that a consortium of domestic businesses would offer up to $11 billion to develop another of Iran’s natural gas fields, Farzad-B field, and create the infrastructure to export the fuel, Bloomberg reported, quoting Narendra Kumar Verma, managing director of the overseas investment unit of India’s largest explorer, Oil and Natural Gas Corp. (ONGC). / Farzad B gas field, Persian Gulf

Iran is the second-largest supplier of crude oil to India, and, as a result, India is one of the largest foreign investors in Iran’s oil and gas industry. However, fraught diplomatic relations between Iran and other states have made it a difficult relationship to uphold.

Under US sanctions, which were reinforced last month, India has been unable to trade with Iran using the dollar — the world’s premier reserve currency — and had to defer payments or revert to payments in rupees and, more recently, euros.

Iran has the world’s largest natural gas reserves and the fourth-largest oil reserves, according to the US Energy Information Administration. This translates to 10 percent of the world’s crude oil reserves and 13 percent of OPEC’s.

Why is Total doing the deal now?

Total was previously one of the biggest investors in Iran before sanctions were imposed. Though the deal was laid out last year, the group has been awaiting clarity on the Trump administration’s stance on sanctions.

During campaigning, President Donald Trump pledged to ‘dismantle’ the 2015 nuclear agreement, which aimed to reduce sanctions, though has not yet followed up on it.

Total has so far only committed to an initial $1 billion investment, citing continued risks. The stock was up 1.78 percent when the deal was signed Monday.

Though the investment will help revive Iran’s antiquated energy sector, which has borne the brunt of years of under-investment into the country, it will be purely domestically focused.

It is likely to have less of an impact on the wider international markets, which have been struggling to balance output since a supply glut saw prices plummet in early 2015.

Brent prices were lower by 0.06 percent in Monday afternoon at $48.75 per barrel while US crude was up 0.09 percent at $46.08 per barrel.

Lack of new deals holding back growth

Indeed, while companies including Royal Dutch Shell and Italy’s Eni have signed provisional agreements with Iran, according to the FT, the path ahead to recovering Iran’s energy sector looks far from smooth.

“Other developments are not so positive,” said Mallinson, citing Azadegan, another Iranian oilfield project which has suffered continued delays amid uncertainties over Iran’s trading future.

“The tender for the Azadegan oilfield was supposed to be imminent but was then pushed back by three or four months to give foreign companies more time for analysis. This suggests that the major firms that Tehran really wants to attract are largely not ready to commit to Iran deals.

“Currently Iran’s oil production has flat-lined and each new delay to the return of foreign investors pushes back the timeline for further growth in output,” Mallinson added.

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Iran’s President Hassan Rouhani inaugurated five new phases of the South Pars Gas Field on Sunday which were completed at a cost of $20 billion, local media reported.

The inauguration of phases 17-21 paves the way for Iran to overtake neighboring Qatar in production from the offshore gas field which it shares with Iran, Iranian officials said, reported AFP.

Iran has so far developed 12 phases in the field – phases 1, 2&3, 4&5, 6-8, 9&10, 15&16.  The remaining phases are 11, 12, 13, 14 and 22-24.

“Our production has reached 575 million cubic meters per day,” said Rouhani at the ceremony.

Iran’s total gas production is 885 million cubic meters per day.

It is estimated that production from every two phases of South Pars would generate $3.5-$4 billion for Iran. Reports further said that the total investments in phases that were inaugurated today would be reimbursed within less than two years.

“At the height of sanctions, with the help of Iranian engineers and workers, we succeeded in developing 11 phases of South Pars,” noted Oil Minister Bijan Namadar Zanganeh.

South Pars is the largest known gas reserves in the world. Iran has the largest gas reserves in the world, and the fourth-largest oil reserves.

Each of the new projects produces 28 million cubic meters per day, Zanganeh told reporters late Saturday.

Qatar announced earlier this month that it was ending a 12-year ban on new projects at its section of the shared field. Qataris call their part of the deposit the North Field, which together with South Pars forms the world’s largest reserves of non-associated gas. Iran has no plans to impede Qatar over its activities at North Field, Zanganeh said. “They can carry out their development projects as we do ours,” he said.

 Iranian President Hassan Rouhani inaugurated Phase 19 development project of the South Pars gas field (SP. 19).

Iran is targeting the export of 50 million cubic meters of gas per day to neighboring Iraq once that country can arrange for a letter of credit to finance the purchase, Zanganeh said.

Since the nuclear deal went into effect in January 2016, Iran has increased oil production from 2.6 million barrels per day (mbd) to 3.9 mbd, while more than doubling its oil exports.

Iran has signed a flurry of deals with Western companies over the past year since the easing of international sanctions on Tehran after an accord was reached over its nuclear program.

Iran needs foreign investment for repairs and upgrading of its oil and gas fields. It also seeks the transfer of technology to its oil industry after a decade of sanctions.

In November 2016, France’s Total became the first oil major to sign a big deal with Tehran since the lifting of sanctions and agreed to help it develop the world’s largest gas field, South Pars.

Shell signed a provisional deal in December to develop Iranian oil and gas fields of South Azadegan, Yadavaran and Kish.

Iran has named 29 companies from more than a dozen countries as being eligible to bid for oil and gas projects using the new, less restrictive contract model.

The firms include Shell, France’s Total, Italy’s Eni, Malaysia’s Petronas and Russia’s Gazprom and Lukoil, as well as companies from China, Austria, Japan and other countries.

Russia’s Zarubezhneft signed an MoU for a feasibility study on two joint fields in the west of the country.

Norway’s International Aker Solutions Company signed an MoU to modernize Iran’s oil industry.

Last May, Austria’s OMV signed an MoU for projects in the Zagros area in western Iran and the Fars field in the south.

South Korean Daewoo Engineering and Construction (Daewoo E&C) signed an MoU to construct an oil refinery in Bandar Jask, on the southern coast of Iran.

Italy’s Saipem signed MoUs to cooperate on pipeline projects, upgrading of refineries and development of Tous gas field in the northeastern province of Khorasan Razavi.

Norwegian oil and gas company DNO said it was the second Western energy company after Total to sign a deal with Iran under which it agreed to study the development of the Changuleh oilfield in western Iran.

Lukoil, Russia’s second biggest oil producer, hopes to reach a decision on developing two new oilfields in Iran.

Germany’s Siemens AG signed an MoU in May to overhaul equipment and facilities at Iran’s oil operations and refineries.

BASF’s Wintershall oil and gas exploration subsidiary signed an MoU with the National Iranian Oil Company in April 2016.

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China‘s Iranian crude oil imports may rise to a record this year as state-owned oil firms lift more crude through their upstream investments while extending their current supply contracts, senior industry and trading sources said.

Chinese firms were expected to lift between three million to four million barrels more Iranian oil each quarter in 2017 than last year, four sources with knowledge of the matter estimated. That would be about five percent to seven percent higher than the 620,000 barrels per day (bpd) of Iranian crude the country has imported during the first 11 months of 2016, according to the customs data.

Iran, a member of the Organization of the Petroleum Exporting Countries (OPEC), won an exemption from the group’s production cuts agreed to on Nov. 30 and may raise output slightly.

China’s demand for foreign crude could touch new highs as state-run refiners start up new plants and as Beijing allows more independent refiners to import crude, with the country forecast to remain a key driver of 2017 demand growth.

State refiner Sinopec Corp and state-run oil trader Zhuhai Zhenrong Corp, the two biggest Chinese lifters of Iran’s oil, are set to roll over annual supply agreements with National Iranian Oil Co (NIOC), with combined volumes of about 505,000 bpd, two sources with knowledge of the agreements said.

Additionally, China National Petroleum Corp (CNPC) and Sinopec expect to lift more oil this year from two oilfields they operate under service contracts, the sources said.

A press official with Sinopec said the company does not comment on operational matters. CNPC and NIOC did not immediately respond to requests for comment.

Sinopec signed a development deal for the Yadavaran field in late 2007 with CNPC signing a deal for the North Azadegan field in 2009, after Japanese and European companies pulled out of the projects, both in the southwestern Iranian province of Khuzestan, due to sanctions over Iran’s nuclear program.

Both fields started pumping oil in early 2016, with North Azadegan reaching full production in the third quarter and Yadavaran in the fourth quarter, and they are currently pumping at around 160,000 bpd.

“The terms of return on investment are still being finalized …but it’s safe to say Sinopec is going to lift more from Yadavaran this year than last,” said a Beijing-based oil executive familiar with Sinopec’s operations on Yadavaran.

A separate senior trading source estimated that Sinopec could lift about four million barrels of Yadavaran crude, considered a heavy grade with an API gravity rating of about 25, every quarter this year. The person did not give an earlier comparison.

After first shipments last October, CNPC is expected to lift an average of about three million barrels from North Azadegan each quarter, said a second senior trader with knowledge of CNPC’s Iranian production. /Reuters

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Japan‘s Inpex Corp. has initiated intense negotiations with National Iranian Oil Company (NIOC) to develop Azadegan oilfield in southwestern Iran and is a strong candidate for the contract, said a high-ranking Iranian official.

Managing Director of Iran‘s Petroleum Engineering and Development Company Noureddin Shahnazizadeh said that Inpex signed a memorandum of understanding on the project last June and with the passage of six-month study period, a final proposal is expected soon, said, Kyodo News reported.

Inpex — which previously held a 75-percent stake in the project but pulled out in 2010 amid US sanctions on Iran — was the first foreign company to sign a memorandum last year on the oilfield which is one of the largest in the world.

However, it has four major rivals — Total SA, Royal Dutch Shell PLC, Petroliam Nasional Bhd (Petronas) and China National Petroleum Corp. — which have also started assessments and begun to send proposals.

“Inpex is one of the good names in the oil industry and as it has experience and data regarding Azadegan, it is one step ahead of its rivals and has a chance to win the Azadegan tender,” Shahnazizadeh said.

Japanese companies have earlier encountered major obstacles in doing business in the Iranian oil and petrochemical industries.

A multibillion-yen petrochemical project by Iran-Japan Petrochemical Company came to an end in 1991 without getting off the ground due to the prolonged Iran-Iraq war.

“There is no remaining conflict between Iran and Japan from the past over Azadegan,” Shahnazizadeh asserted, noting, “We understood Inpex’s situation when they were forced to leave the project, and now they are welcome again.”

According to Shahnazizadeh, Total has already handed over a final proposal for the project, while Inpex and CNPC will submit their presentations soon.

The deal is expected to be completed around the first quarter of 2017, and the contractor will be chosen by summer.

Technical, financial and recovery factors will determine the winning bid, Shahnazizadeh said.

West Karoun oil region, which includes the Azadegan and Yadavaran oilfields, which has a 67-billion-barrel deposit of crude oil, has a contract value of some $25 billion.

About $9 billion has already been invested in West Karoun, but Shahnazizadeh stopped short of specifying how much the Azadegan contract alone is worth.

International companies started negotiations to return to the Iranian market after Iran inked a landmark deal with world powers in 2015 to modify its nuclear activities in return for an end to economic sanctions.

Only companies that Iranian authorities determine as contributing to the transfer of modern technology to Iran are recognized as ‘qualified’.

“Iran expects Japan to transfer and apply the use of modern technology in exploration, drilling and recovering to increase the rate of recovery, which is the most important criteria for Iran,” Shahnazizadeh said.

During heavy sanctions from 2010 to 2015, Iran’s oil production fell to nearly one million barrels per day. Japan nevertheless remained the third-largest importer of Iranian crude oil, after South Korea and China.

Japan was also the only country that accepted insurance risks through the period and transferred oil from Iran on its own vessels — a move that Shahnazizadeh described as ‘unforgettable loyalty’.

The Japanese government signed an investment pact in February to help Japanese companies do business there amid intensifying foreign competition.

Then in February, the government-backed Japan Bank for International Cooperation and Nippon Export and Investment Insurance gave Iran a credit of up to $10 billion.

Iranian officials said they hope political issues, especially recent changes in the United States, will not negatively impact cooperation between Iran and Japan, as was the case in 2010.

“I believe we will have a very close and friendly relations with Japan in the oil sector in the future, as long as a third party doesn’t impact our relations negatively again,” Shahnazizadeh said.

Apart from Inpex, which is the only Japanese company that has signed a memorandum of understanding in Iran’s oil upstream, five other Japanese companies are recognized as qualified to participate in downstream projects like petrochemical and refinery.

After the lifting of sanctions, Iran’s oil production increased and reached 3.5 mbd within nine months, returning to the same level as in 2011.

Oil industry officials aim to keep increasing output in coordination with multinational companies.

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National Iranian Oil Company (NIOC) has affirmed adequacy of 29 international oil and gas companies willing to put in tenders for Iran’s upstream oil sector.

NIOC intends to invite several rounds of tenders for a number of oil exploration & production (E&P) projects; accordingly, credible and qualified foreign E&P firms were asked to participate in the competence evaluation process.

Conformity assessment documents and related information, including evaluation methods, criteria and procedures were placed on the official website of NIOC on October 17, 2016.

Applicants were required to submit a copy of demanded documents along with electronic files as long as December 04.

According to NIOC official website, secretariat of tenders for upstream oil and gas sector contracts, upon receiving information from interested companies and evaluation of documents, promulgated names of 29 accredited foreign firms.

The final list contains names of prominent oil giants from Germany, France, Italy, Norway, Malaysia, Russia, Austria, Thailand, Japan, Poland, the Netherlands, Britain, Spain and China among the others.

So far, numerous Memoranda of Understanding (MoUs) have been inked with foreign companies for development of oil and gas fields though the first international tender in Iran’s oil industry is scheduled to be invited in coming months for expansion of South Azadegan field.

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